Monday, October 31, 2011
Interestingly enough, Americans will spend more money on adult costumes this year - $1.21 billion - than on children's costumes - $1 billion. Those numbers were $990 million and $840 million last year. We'll also spend an additional $310 million this year on costumes for our pets.
And the most popular costume? We can expect to see roughly 2.6 million zombies rising from the dead this year, then roaming the streets of America asking for candy.
Thursday, October 27, 2011
The biggest growth trigger was personal consumption expenditures, which grew 2.4 percent in the quarter after growing just 0.7 percent in the second quarter. Sales of computers accounted for 0.21 percentage points of the growth in GDP after adding 0.07 percentage points in the second quarter. Motor vehicles had accounted for a 0.10 percentage-point drop in the second-quarter GDP, but rebounded to add 0.07 percentage points to this quarter's growth.
With this solid quarter, we've turned a significant corner: The overall economy has now surpassed the size it was prior to the recession. Our inflation-adjusted gross domestic product totals roughly $13.35 trillion at this point. The size of the economy had peaked at around $13.33 trillion towards the end of 2007, before contracting in the recession.
The biggest winner was the consumer information services category, which includes such things as online search firms and social media. Those businesses received more than a billion dollars from venture capital firms in the quarter, in a total of 103 different deals. That's more than double the dollar figure raised in the same quarter last year.
According to Dow Jones VentureSource, which compiled the numbers, venture-capital activity is now on a pace to return to pre-recession levels by the end of the year. That could be a big jump-start for this sluggish economy.
Wednesday, October 26, 2011
The percentage of people who expect business conditions to be better in six months declined, as did the percentage of people who expect their income to decrease over the next six months. On the other side of the coin, the number of people saying that business conditions are bad right now increased in October, as did the number of people saying that jobs are "not so plentiful."
While these consumer confidence numbers provide a lot of insight into where consumer spending might be headed, it's important to realize that the people surveyed are random Americans, who don't have any special insight into the economy. For instance, the same survey found that inflation expectations over the next 12 months are at 5.8 percent. While anything is possible in this economy, the annual inflation rate hasn't actually been that high since 1982.
Tuesday, October 25, 2011
The thing that's changed is people's confidence in their ability to pay for their basic living expenses in retirement. In December 2008, after the recession had already been in effect for a year, 46 percent of Americans said they were very confident they'd be able to pay for their retirement expenses. Only 14 percent said they were "not at all" confident.
Now those numbers have reversed. In the 2011 survey, more respondents - 28 percent - said they were not at all confident about their retirement than those who said they were very confident (23 percent). The biggest issue here may be a lack of confidence in government: Confidence about Social Security has dropped from 22 percent in 2008 to 9 percent now, and confidence about Medicare has dropped from 20 percent to 8 percent.
Monday, October 24, 2011
Yet, by and large, they don't expect this event to be too traumatic for the American economy. The majority of respondents did forecast that Europe is likely to be thrown into recession by a Greek default, yet only 25 percent expect that to turn into a global recession. That's down from 40 percent that expected a global recession as recently as September.
So a Greek default may not be as dangerous as it sounds. In one sense, it would be an opportunity to put the immediate problem behind us, and the European governments can get back to focusing on growing their economies rather than pursuing endless bailouts of Greece. In the long term, that might be the best remedy for all.
Friday, October 21, 2011
There are also some cost-of-living adjustments that should provide a small amount of tax relief for high-income taxpayers. The personal exemption will rise from $3,700 to $3,800, and the standard deduction for married couples will go up from $11,600 to $11,900. And the 35 percent top bracket will now apply to incomes of $388,350 and higher, up from $379,150 this year.
There is also some small movement on the estate tax, which his been a moving target for the past few years. The exemption will be raised to $5.12 million next year, up from $5 million. But be warned: At this point, that exemption is scheduled to drop back to $1 million at the end of 2012, unless more legislation is passed.
Thursday, October 20, 2011
Consider that the quarter saw record sales of both Macintosh computers and iPads. The overall revenue for the quarter was $28.3 billion, the second-best quarter on record for Apple. Revenues were up year-over-year by 39 percent. Profits were up by 54 percent. There's nothing wrong with any of that; the issue is that the analysts' consensus expected earnings to be 3 percent higher than they actually were.
As a result, Apple lost 6.5 percent off its share price in after-hours trading on Tuesday following the earnings report. But for long-term investors, missing (or meeting) Wall Street's quarterly expectations should be merely a blip.
Wednesday, October 19, 2011
According to RealtyTrac, short sales were up 19 percent in the second quarter of this year, while foreclosures were flat. HomeServices of America, a residential brokerage, says it now sees about 60 percent short sales and 40 percent foreclosures, whereas those figures used to be reversed. It's not much of a surprise that short sales would be preferred by banks: They generally end up selling at a discount of about 20 percent, compared to similar homes not in default. Foreclosures typically carry a discount of around 40 percent.
And then there's the time saved. As we mentioned recently, foreclosures in New Jersey take an average of around two and a half years. Speeding up that process will help clear the excess inventory off the market, and get everything moving again.
Tuesday, October 18, 2011
In the first half of 2011, the industrial numbers had slowed to practically nothing. The indicators had shown that, for those six months, our industrial output was the weakest it had been since the onset of the recession in 2007.
So the fact that the numbers have reversed direction is very good news indeed. The growth in industrial output led the chief market strategist for JP Morgan to estimate that we'll see an increase in GDP for the third quarter somewhere between 2 and 3 percent. For the second quarter, remember, it was just 1.3 percent.
Monday, October 17, 2011
Here are the factors that more than half the investors cited as reasons for their concern:
Unemployment; weak economy: 85 percent
Volatility on Wall Street: 80 percent
Confrontational political stalemate: 74 percent
Lack of national leadership: 71 percent
Federal Reserve policies: 51 percent
Financial crisis in Europe: 50 percent
Friday, October 14, 2011
Apparently, he wasn't just asking for his account balance. The teller's request completely spooked the man, who fled from the bank on foot. A local police officer spotted him, though, and arrested him. The man is now being held on charges of attempted robbery.
Let that be a lesson to you. If you ever walk into a bank and give the teller a note asking what their 90-day CD rates are, make sure you write very clearly.
Thursday, October 13, 2011
As of the beginning of this week, 29 companies in the S&P 500 had announced their earnings, and 21 had beaten the analysts' estimates. That's a mark of 72 percent, but remember, the average percentage of companies that beat analysts' earnings estimates is 61 percent. So we're above average, but not by as much as that 72 percent might suggest.
On the other hand, the Web site Thestreet.com looked at all the companies that had pre-announced earnings guidance in recent weeks, and found that the ratio of negative-to-positive news was 2.6 to 1. That might sound terrible, but again, those numbers are ordinarily skewed. The average figure is 2.3 to 1, so the number of companies reporting bad news is only a little bit higher than normal.
Wednesday, October 12, 2011
Take Social Security. A full 45 percent of the respondents said that Social Security would be an important part of their retirement scenario. But only 17 percent knew that by delaying when you begin accepting that retirement benefit by three years, you can add 24 percent to your annual total.
The reason that's so important is because Social Security is guaranteed to last till the end of your life, and it's indexed to inflation. If you can maximize those benefits to where you're receiving, say, $30,000 a year, and you live in retirement for 25 years, with a little inflation adjustment, Social Security can be a nearly million-dollar proposition. That means you should manage it with the care and attention you would put toward any other million-dollar aspect of your portfolio.
Tuesday, October 11, 2011
Overall, the percent of short sales is at its highest level since 2009. About 4.1 percent of the shares on the NYSE have already been borrowed and sold, up from 3.5 percent in July. Since short selling is a bet that a stock will decrease in price, this can be taken as an indicator of a further market decline.
Of course, that's only one indicator. Bloomberg News yesterday released the results of a poll of economists, who predicted that the S&P 500 would grow by 13 percent between now and the end of the year. If that happens, there are going to be a lot of disappointed short-sellers out there.
Monday, October 10, 2011
Here are how some mutual-fund sectors made it through the third quarter:
Precious-Metals Stocks: Down 6.2 percent
Utilities: Down 6.6 percent
Health: Down 13.5 percent
Real Estate: Down 14.7 percent
Technology: Down 15.9 percent
Financial: Down 20.2 percent
Industrials: Down 21.3 percent
Energy stocks: Down 21.3 percent
Natural Resources: Down 25.9 percent
Did anything survive the quarter unscathed? According to the New York Times, there was one general U.S. stock fund that finished in positive territory: The Hussman Strategic Total Return fund. It gained 2.4 percent.
Friday, October 7, 2011
The breakdown for September was that the private sector added 137,000 jobs, while government payrolls fell by 34,000. The biggest-gaining sectors were service providers, who added 85,000 jobs on the month, and construction, which added 26,000. There was a decline of 13,000 factory jobs, the biggest loss in that category since August 2010.
While the trend is in the right direction, 103,000 new jobs a month is really only enough to tread water in a growing population. Economists estimate that we need to create closer to 200,000 jobs a month to really make a difference in the unemployment rate. The trend is in the right direction, but we aren't quite there yet.
Thursday, October 6, 2011
Here's a quick timeline of Jobs' life work:
April 1, 1976: Steve Jobs co-founds Apple Computer.
December 1980: Apple goes public in the biggest IPO since Ford Motor in 1956, with a market valuation of $1.8 billion.
January 24, 1984: The Macintosh goes on sale to the public.
May 1985: Jobs is fired from Apple. The company's split-adjusted stock price is about 2.5.
1996: Apple announces it has bought Jobs' company NeXT, bringing him back to the fold.
September 16, 1997: Jobs becomes CEO of Apple once again. The company's split-adjusted stock price is 5.4.
November 10, 2001: The iPod goes on sale to the public. Apple's share price is at 9.
June 29, 2007: The iPhone goes on sale to the public. Apple's share price is at 122.
October 5, 2011: Steve Jobs dies. Apple's share price is at 377. Its market cap of $350 billion makes it the second-largest corporation in America after ExxonMobil.
If you had bought 100 shares of Apple on the day Steve Jobs was re-introduced as the company's CEO, your $540 investment would now be worth $37,700.
Wednesday, October 5, 2011
Since 1990, in those periods when the VIX has closed above 40 - which it only does around 3 percent of the time - the S&P 500 has returned 3.2 percent on average over the next three months. And over the ensuing 12 months, the S&P has historically returned 19 percent.
The volatility index looks at the prices paid for options that are designed to protect investors from losses in equity investments. It's a contrarian indicator, in that it shows that individual investors are fearing the worst - which means the market has turned into a good buy. That's the theory anyway; we'll see how well it holds up this time.
Tuesday, October 4, 2011
Monday, October 3, 2011
Despite the fact that the economy remains very sluggish, there is some good news to report as far as retirement planning goes. After retirement plans took a huge hit in the market downturn of 2008-2009, people are starting to build up those nest eggs again. Over the past year, 41 percent of American workers say they have increased their contributions to their 401(k)s. That's up from 31 percent who did so in 2010.
That's been a part of a huge bounceback in overall retirement savings. After the nation lost a huge amount of money in 2008, the value of U.S. retirement assets has been growing steadily ever since. Here's the recent history of the total value of all the 401(k)s, IRA, pension plans and government plans in the U.S.:
2007: $17.9 trillion
2008: $14.0 trillion
2009: $16.1 trillion
2010: $16.7 trillion
2011: $18.2 trillion